I am a 70-year-old grandmother who still works. I also collect my former husband’s Social Security and pension. I would like to redeem some post-1989 Series EE savings bonds that I inherited to set up 529 college plans for my two grandchildren.
Can you tell me if the interest on these, which will be considerable — approximately $450 on each $50 savings bond — is taxable interest?
– Mary Ann Mobilize
Dear Mary Ann,
It’s not as straightforward as you would hope, but you may be able to do this in a roundabout way by using the proceeds to fund Section 529 college savings plan(s) in your name as owner and beneficiary and subsequently change the named beneficiaries to your grandchildren, as long as you qualify for the educational tax exclusion. More on that to follow.
I asked Mark Kantrowitz, senior vice president and publisher of Edvisors.com, to help me with this reply, but both he and I recommend that you get professional tax advice before taking these steps. Here are Mr. Kantrowitz’s thoughts about your goal.
“For the interest on a Series EE U.S. savings bond issued in 1990 or a later year and the interest on a Series I bond to be tax-free under the IRS’ Education Savings Bond Program, the bonds must be owned by the taxpayer (not co-owned by the dependent) and the purchaser must have been age 24 or older when the bond was issued. The bonds must either be redeemed to pay qualified higher education expenses of the taxpayer, the taxpayer’s spouse or the taxpayer’s dependents, or rolled into a qualified tuition plan.
There are also income phaseouts that apply to the taxpayer for tax-free treatment (2014 tax year):
- $76,000 to $91,000 (single)
- $113,950 to $143,950 (joint)
The American consumer finance watchdog is weighing up tougher rules to govern payday lenders, mirroring the recent clampdown on short-term loans in the UK.
The Consumer Financial Protection Bureau (CFPB), one of several new regulators set up in the US in the wake of the financial crisis, hopes to introduce the first ever set of national rules policing payday lenders.
The regulator plans to meet such lenders in the next few months to discuss ways to ensure customers can afford to pay back their debts, according to the Wall Street Journal.
The CFPB declined to comment on the report, but the watchdog’s leader Richard Cordray said last year that his team was “now in the late stages of our considerations about how we can formulate new rules to bring needed reforms to this market”.
Payday loans are currently regulated at state level in the US, with 45 states enforcing some form of price cap. Some states, such as Washington, have imposed tougher rules such as limiting customers to eight short-term loans per year.
A study by the research company Policis found that six in ten online payday transactions made in the US are arranged with unregulated lenders, representing $9.7bn-worth of debt.
The United States also regulates short-term lenders through the Military Lending Act, a law that from 2007 has capped the annual percentage rate on payday loans at 36pc for those who served in the armed forces.
About a third of the payday loans in the United States are made over the internet. This is much lower than in the UK, where online loans group Wonga alone represents about a third of the market.
A price cap on payday loans for UK borrowers came into force on January 2, with firms banned from charging more than 0.8pc interest per day or more than twice the original loan in fees and fines.
The Financial Conduct Authority is also preparing to judge every payday lender’s application to operate in the UK, as part of its new role as the consumer finance regulator. The FCA inherited responsibility for 50,000 finance providers when it took over from the Office of Fair Trading in April 2014.
When it comes to getting the best deal on what is most consumers’ biggest purchase and borrowing decision, nearly half of us don’t even shop around, according to a report released Tuesday by the Consumer Financial Protection Bureau. And that could be costing you money,
Three-quarters of all home buyers only apply to one lender, the bureau found. Not shopping around could have a significant impact on whether consumers are getting the best loans with the best terms or paying more than they have to, the agency said.
Consumers who are more educated about the process and shop around are far more likely to get a mortgage with the best possible terms and a potentially significant savings over those who don’t.
The agency, which drew its data from a voluntary survey included in mortgage applications, is now promoting a consumer education tool — the interactive online toolkit “Owning Your Own Home” — to help consumers be better prepared when buying a house.
“Our study found that many consumers are not shopping for a mortgage,” CFPB Director Richard Cordray said. “Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating. … We want to enable consumers to be more savvy shoppers.”
Shopping Around Pays Off
The data showed some 70 percent consumers relied on information from their lenders or mortgage brokers, the CFPB said, noting that while they are knowledgeable, they also had a vested interest.
Those who understood rates, types of loans and other aspects were far more likely to shop around for a good deal than those who weren’t, the survey found.
It isn’t unusual to have a spread of a half percent on a mortgage for someone with good credit. And the CFPB noted that on a loan for $200,000, saving that extra half percent could amount to about $60 a month, or about $3,500 in mortgage payments and greater equity growth.
The CFPB is also offering a mortage rate checking tool that allows consumers to put in the variables that a lender would consider — credit score, down payment, home cost — to get an idea of different loan types available and their interest rates.
The bottom line, the CFPB said, is the more a consumer knows going into the process the more likely they’ll get a good result.
Entrepreneurs are a rare breed of individuals who are constantly exploring new business opportunities. Some seek out new opportunities on their own while others are constantly being pitched new ideas.
The majority of opportunities, no matter how good they might sound, end up being a complete money-sucking nightmare due to expensive overhead, slow scalability and low margins. Online businesses, however, can be very appealing because they don’t have the traditional hurdles that most new ventures face. The following are four reasons why online businesses are the best investment entrepreneurs can make.
1. Offers incredible scalability
Not every single online business is going to automatically morph into a huge success with rapid exponential growth. Many entrepreneurs start an online business thinking customers are automatically going to find them and sales will pour in because they have a small footprint on the Internet. They think that a few tweets and some Facebook posts are all it will take to snowball an online business into a virtual ATM machine.
Scaling any business is not easy, whether it is a brick-and-mortar location or an online business, but an online business has advantages. For instance, a brick-and-mortar retail store has a defined audience, typically a radius from the business location. An online business isn’t restricted by this and can market to a worldwide audience.
Once a successful marketing and advertising strategy is identified an online business can simply open up its target and increase budget to grow very fast.